Bitcoin ‘faces headwinds’ as US money supply shrinks most since 1950s
Bitcoin (BTC) and crypto could yet see a long-term correction thanks to central banks keeping liquidity tight, Bloomberg warned.
In its latest research, Bloomberg Intelligence revealed a cool stance on the ongoing crypto market rally in 2023.
Bloomberg: Expecting BTC Price to Hold ‘May Be Illogical’
Despite gaining 70% in Q1, Bitcoin is not convincing everyone that it will continue to climb or even maintain current levels near $30,000.
Examining the macroeconomic climate, Bloomberg Intelligence became the latest voice to note the close relationship between crypto performance and global central bank liquidity levels.
As inflation bites, banks have been withdrawing liquidity from the economy, with risky assets as a result – including crypto. The US Federal Reserve’s quantitative easing (QT), which began in late 2021, coincided with Bitcoin’s current record high.
Despite the recent banking crisis, Bloomberg noted that falling M2 money supply and bank deposits mean liquidity continues to be squeezed.
“Risk assets typically rise and fall on the back of liquidity and falling US money supply, and bank deposits indicate headwinds for crypto,” said an analysis uploaded to Twitter by Bloomberg Intelligence senior macro strategist Mike McGlone.
“It may be illogical to expect the stock market, crude oil, copper and the Bloomberg Galaxy Crypto Index (BGCI) to sustain recent gains with year-over-year measures of money supply and commercial bank deposits falling around 2% – the most in our database since 1959 .”
The concerns come as Bitcoin faces a battle to turn historical resistance back into support, with bulls yet to pull off big changes.
In terms of liquidity, meanwhile, others have already noted that crypto is now responding to the actions of central banks other than the Fed, with both China and Japan adopting liquidity supplements this year.
“A main question at the beginning of April is what is stopping contract liquidity?” Bloomberg, meanwhile, continued.
“Most central banks still tightening could herald a lower plateau for the BGCI. Our view is that Bitcoin faces headwinds, but will eventually move to trade more like gold and Treasuries.”
US dollar gives Bitcoin heat
BTC/USD was trading around $28,100 at the time of writing on April 6, according to data from Cointelegraph Markets Pro and TradingView.
Related: Latest Bitcoin Price Data Suggests Double Top Above $200K in 2025
In a potential short-term tailwind for risk assets, the US Dollar Index (DXY) saw fresh losses, abandoning a modest comeback to fall back below 102.
Analyzing the situation, popular Crypto Twitter account Cold Blooded Shiller remained optimistic about the outcome of BTC’s price for the time being.
Still, analyst Justin Bennett flagged a distinct range that remains intact for DXY, predicting a rally to come.
“All the ‘dollar is dead’ chants are about to be silenced by what remains the global reserve,” he warned.
Related: Crypto winter can take a toll on hodlers’ mental health
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